Correlation Between Cisco Systems and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Alcoa Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cisco Systems and Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Alcoa Corp, you can compare the effects of market volatilities on Cisco Systems and Alcoa Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cisco Systems with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Alcoa Corp.
Diversification Opportunities for Cisco Systems and Alcoa Corp
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cisco and Alcoa is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Cisco Systems is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cisco Systems are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Cisco Systems i.e., Cisco Systems and Alcoa Corp go up and down completely randomly.
Pair Corralation between Cisco Systems and Alcoa Corp
Given the investment horizon of 90 days Cisco Systems is expected to generate 2.87 times less return on investment than Alcoa Corp. But when comparing it to its historical volatility, Cisco Systems is 2.89 times less risky than Alcoa Corp. It trades about 0.09 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,578 in Alcoa Corp on August 24, 2024 and sell it today you would earn a total of 1,978 from holding Alcoa Corp or generate 76.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Alcoa Corp
Performance |
| Timeline |
| Cisco Systems |
| Alcoa Corp |
Cisco Systems and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Alcoa Corp
The main advantage of trading using opposite Cisco Systems and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Alcoa Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.| Cisco Systems vs. Eshallgo Class A | Cisco Systems vs. Amtech Systems | Cisco Systems vs. Gold Fields Ltd | Cisco Systems vs. Aegean Airlines SA |
| Alcoa Corp vs. Eshallgo Class A | Alcoa Corp vs. Amtech Systems | Alcoa Corp vs. Gold Fields Ltd | Alcoa Corp vs. Aegean Airlines SA |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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